Should We Buy Life Insurance or Save for College?

My husband and I recently met with an insurance salesman that advised us to purchase several types of life insurance — term and another one. I have life insurance from work and can add my husband to the policy. It’s much more affordable but would end if I left my place of work.

Should we buy life insurance or are we better off saving that money in college funds for our kids? I'm 40, my husband is 43. Also, we want to set up a will. Is it advisable to go through an attorney (just got a quote for approximately $3,000) or are the online services as valid? — Maria

The short answer? You need to do both, if you can. Since you have children, I agree with you that it is prudent to carry a life insurance policy in case something happens to you or your husband. To make the decision between purchasing term life insurance from your employer versus your friendly insurance salesman, you need to study the premiums, coverage and other terms of both policies. The salesman made his pitch; now you should ask your employer for the contact information for your employer's selected insurance provider and hear their pitch.

You should be aware that many insurance products have high commissions — very high, in many cases — so I encourage you to ask the salesman how he gets compensated. Could the difference in rates be attributed to the size of his commission?

What was the second type of insurance? An annuity? Based on your relatively young age I'd rather see the money you have earmarked for investing be deposited into a 529 college savings account for your children or towards a higher contribution to your 401(k) or IRA, if you’re not already maxing that out.

With respect to the will, you get what you pay for. If your needs are straightforward, I would recommend using a reputable online service which would costs hundreds, not thousands, of dollars. You should review your will whenever you have a life-changing circumstance or at least every five years. So you could always upgrade in the future and pay an attorney to update your existing will. If you do have a complicated family situation then you may feel more comfortable paying an attorney.